Allstar Capital Pty Limited v FIP Holdings Victoria Pty Limited

1. [1]

   The applicants, McCabes Lawyers Pty Ltd and McCabe Curwood Lawyers Pty Ltd, seek by motion pursuant to r 33.11 of the Uniform Civil Procedure Rules 2005 (NSW) their reasonable costs of complying with subpoenas served on the firms. The issue involves only one firm of lawyers which underwent a change of arrangement and name. I shall therefore refer to them jointly as the applicant.

Background

1. [2]

   The applicant had previously acted for the plaintiff, Allstar Capital Pty Ltd, on a commercial transaction it entered into with the defendant, FIP Holdings Victoria Pty Ltd (FIP), prior to the commencement of the proceedings.

2. [3]

   On or about 23 August 2018 FIP served a subpoena to attend to give evidence and to produce, naming the recipient as “McCabe Curwood”. The documents required to be produced were described as follows:

3. [4]

   $25.00 conduct money was provided.

4. [5]

   On 30 August 2018 the applicant sent a letter by email to the solicitors for FIP, M Law Group, seeking clarification about whether a subpoena to give evidence was really intended (given the recipient was a firm). The letter also raised the issue of the scope of the production sought, requested a copy of the pleadings in the proceedings to assess the relevance of the documents sought, and requested that the initial return date be adjourned in order to afford FIP the opportunity to limit the scope of the subpoena.

5. [6]

   On 12 September 2018 M Law Group emailed Belle McKinley, the solicitor at the applicant dealing with the matter, copies of two further subpoenas dated 29 August 2018 which had a return date of 14 September 2018. They were served late and M Law Group agreed to an adjournment for that reason. On 13 September 2018 the applicant received hard copies of the subpoenas and two cheques each in the sum of $25.00 for conduct money. The new subpoenas contained almost identical wording to the schedule in the first subpoena.

6. [7]

   After further correspondence from the applicant to M Law Group, M Law Group wrote on 18 September 2018 providing copies of the pleadings and saying that the defendant wanted loan documentation between the parties in and around October 2017.

7. [8]

   The applicant wrote again on 24 September 2018 asking for specificity with what documents were required to be produced and the relevant period.

8. [9]

   On 3 October 2018 M Law Group wrote to the applicant saying (inter alia):

9. [10]

   Further correspondence ensued about additional adjournments because of the limited time for the applicant to identify the documents following the identification of the relevant period by the solicitors for FIP.

10. [11]

    The applicant produced the documents in compliance with the subpoenas on 10 October 2018.

11. [12]

    On 12 October 2018 Ms McKinley wrote to FIP’s solicitors estimating their reasonable costs for compliance with the subpoena at approximately $7,500 plus GST. It appears that at about this time the name of FIP’s solicitors changed to Eden York. This email was so addressed. The email went on to say this:

12. [13]

    Having received no response to that email, the applicant wrote to FIP’s solicitors on 19 October 2018 making a claim pursuant to UCPR r 33.11 for payment of the applicant’s reasonable losses and expenses incurred in complying with the subpoenas in the amount of $7,675 plus GST. They attached a schedule of the breakdown of the work done and the costs totalling that sum.

13. [14]

    No response was received to that letter and a further email was sent by Ms McKinley on 14 November 2018 asking for a response by 21 November 2018, failing which the applicant would seek appropriate orders from the Court.

14. [15]

    No response having been received, Ms McKinley sent a further email on 10 December 2018 to FIP’s solicitors saying:

15. [16]

    No response was received by the applicant to that or any earlier email and correspondence.

16. [17]

    On 7 February 2019 the applicant sent a further email to FIP’s solicitors saying (inter alia):

17. [18]

    A senior associate at the applicant, Fiona Lymant, telephoned Michael Doueihi at FIP’s solicitors on 25 and 26 February 2019 and left messages for him to return her call. Mr Doueihi did not return the calls. On 27 February 2019 Ms Lymant again rang Mr Doueihi and had a conversation with him to this effect:

18. [19]

    Later on 27 February 2019 Mr Doueihi sent an email to the applicant which said (inter alia):

19. [20]

    A few observations should be made about that email. First, Ms Lymant could not be criticised for typing a record of a conversation she was having with FIP’s solicitors, particularly when the lawyers were engaging in the discussions required by r 42.33 UCPR. Given the lack of any response to attempts by the applicant at negotiation, it may well have been necessary to record accurately for an affidavit anything that was said during the telephone call. Secondly, it is not apparent when those lawyers had “always maintained” that the applicant’s fees were “grossly over exaggerated and totally unreasonable”, because they had never responded to the email of 12 October 2018 estimating those fees, or to any subsequent correspondence.

20. [21]

    Thirdly, given that the applicant had forwarded a schedule showing a breakdown of the costs it claimed, the response from Mr Doueihi more than four months after that schedule was sent, does not constitute any compliance with r 42.33. Finally, I note that Mr Doueihi’s email contains no apology for having ignored correspondence from the applicant for that four month period.

21. [22]

    Ms Lymant replied to Mr Doueihi on the same day noting that his email was the first correspondence the applicant had received and was the first time that the applicant had been informed that its costs were “grossly over exaggerated and totally unreasonable”. The email went on to point out that the schedule of costs gave a breakdown of the work done, the time spent and the fees charged. It invited FIP to comply with its obligations under r 42.33 by making an offer as to the amount of costs it would be willing to pay in relation to compliance with the subpoenas. The letter sought a response within seven days to resolve the matter as quickly as possible. The email warned that if there was no response within that time a notice of motion would be filed to recover compliance costs under r 33.11.

22. [23]

    No response was received to that email, and the applicant filed its notice of motion on 19 March 2019.

23. [24]

    By the time the motion was filed the applicant had incurred further costs of $6,993, principally arising from the attempts to comply with r 42.33 and preparation of documents in relation to the notice of motion.

24. [25]

    Further costs of approximately $2,000 have been incurred by the applicant for court attendances in relation to the notice of motion on 4 and 9 April 2019 and for preparation of the hearing of the motion. The total of the costs to the time of the preparation of the applicant’s written submissions for the hearing of the motion amounted to $19,285.

Legal principles

1. [26]

   In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 Lockhart J was considering a relevantly similar provision in the then Federal Court Rules (Order 27 r 4A) to what is contained in UCPR r 33.11. His Honour said (at 286):

2. [27]

   That decision has been followed in New South Wales in Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 at [21] and Kumagai Australia Finance v Avarton Ltd (Supreme Court (NSW), Bryson J, 7 June 1991, unrep).

3. [28]

   As to what constitutes reasonable expenses, Brereton J in A Pty Ltd v Z [2007] NSWSC 999 said at [45]:

4. [29]

   In Foyster v Foyster Holdings [2003] NSWSC 881 Campbell J (as his Honour then was) said at [11]-[12]:

Submissions

1. [30]

   At the hearing of the motion a person by the name of Nathan Elali sought to appear on behalf of FIP. Mr Elali was not a director or an officer of the company but handed up a written authority to represent the company at the hearing of the motion, signed by George Bojdak, the sole director and secretary of the company. I was initially reluctant to permit Mr Elali to appear in that way because I took the view that r 7.1 UCPR only permitted a solicitor or a director of the company to appear. However, to avoid further delay in the determination of the matter I was ultimately persuaded by both Mr Elali and Mr Dominish who appeared for the applicant that I should dispense with the requirements of that rule pursuant to the power contained in s 14 of the Civil Procedure Act 2005 (NSW).

2. [31]

   A consideration which informed that decision was the fact that a written submission had already been filed by Mr Bojdak on 3 June 2019 and the letter of authority to Mr Elali also included a further written submission by Mr Bojdak. Both those written submissions and Mr Elali’s oral submissions focused on the time after the notice of motion was filed by pointing to two offers apparently made by FIP to resolve the costs issue. Mr Dominish objected to my receiving the submissions in that regard because, he said, both offers were made on a without prejudice basis. This was not because they were expressly so marked but, he submitted, the nature of the offers pointed to the fact that they were made without prejudice. However, ordinarily such offers are made without prejudice except as to the issue of costs, and it is the issue of costs with which this motion is concerned. The written submissions from FIP in any event disclosed the amount of the offers made. I saw no reason not to receive the submissions but, in my opinion, they did not advance the position of FIP because the offers were, in all the circumstances, woefully inadequate.

3. [32]

   The applicant submitted that it would be appropriate for a fixed sum costs order to be made. This was because FIP was largely, if not wholly, responsible for the payment of the costs, and because an assessment of costs would be protracted and expensive, especially considering a relatively small sum is involved. The applicant submitted that although its costs total $19,285 not including the costs of the hearing of the motion, it sought only a fixed sum of $10,000.

4. [33]

   In relation to paying the reasonable costs generally, Mr Elali submitted that the costs should have been assessed in the ordinary course. I drew his attention to the provisions of UCPR r 42.33 and the failure of FIP’s solicitors to respond to correspondence from the applicant. Mr Elali submitted only that the costs assessment process should have been undertaken, and that FIP’s solicitors should be punished and not the company. He drew attention to the offers that were made after the notice of motion was filed. That approach only highlighted the difficulty of unqualified persons seeking to appear in matters where a knowledge and understanding of the Rules of Court and court processes are necessary.

Determination

1. [34]

   In my opinion, it was appropriate for the applicant to seek a fixed sum costs order in conjunction with the order under r 33.11 UCPR. It is apparent from the attitude taken by FIP that the only other way this matter could be determined would be a costs assessment. The total amount of the costs involved does not justify the time and expense involved in such a process. It is unsatisfactory that a third party to litigation which is obliged to comply with the service of a subpoena should endure the delay caused by such an assessment and undergo the process in any event. The delay involved in that process is emphasised in the present matter by the dilatory manner in which FIP and its solicitors have treated the obligation upon them under r 42.33. At the present time, costs commenced to be incurred by the applicant almost nine months ago.

2. [35]

   In my opinion, the applicant is entitled to an order under r 33.11. The reasonable costs are not only those involved in the initial dealing with the subpoenas up until the time the documents were produced but extend in this case to the expenditure by the applicant up to the present time.

3. [36]

   I accept the submission of the applicant that the costs of compliance were increased by a number of matters being:

4. [37]

   The costs were also unreasonably increased by the failure on the part of FIP’s solicitors to negotiate and reach agreement under r 42.33. Costs incurred by the applicant after production of the documents and by reason of the filing of the notice of motion were entirely brought about by the failure of FIP and its solicitors to comply with r 42.33.

5. [38]

   The failure of FIP’s solicitors to negotiate in accordance with r 42.33 and, indeed, even to respond to correspondence from the applicant about the matter, was not only an abdication of the solicitors’ professional responsibilities and the solicitors’ obligations under s 56 of the Civil Procedure Act 2005 (NSW), but also inevitably caused the applicant to file the present motion to seek its reasonable costs.

6. [39]

   I am entirely satisfied that the amount sought by the applicant as a fixed sum costs order is appropriate and represents reasonable costs of compliance with the subpoena. When it is borne in mind that the recipient of a subpoena is entitled to costs on a solicitor and client basis, the applicant would only be deprived of any of the costs incurred in a similar way to a reduction on assessment when indemnity costs are ordered against a party to proceedings. I have no doubt in the present case that the amount of costs actually incurred by the applicant would not be reduced by a figure that remotely approaches the reduction that the applicant is prepared to accept in return for a fixed sum costs order.

7. [40]

   The finding that the applicant should be entitled to reasonable costs and that the fixed sum sought amounts to reasonable costs is not made, contrary to FIP’s submission, to punish FIP but to compensate the applicant for the costs incurred. If the submission was intended to suggest that FIP should not, but Eden York should, be responsible for those costs, then it is a matter for FIP to claim against Eden York in that regard. Although the Court has the power under s 99 of the Civil Procedure Act to order costs against a legal practitioner in the circumstances set out in that section, I do not consider that I should exercise that power in the absence of any representative of Eden York to make submissions in relation to the matter. I do not know, for example, to what extent, if any, FIP had any responsibility for Eden York’s acts and omissions during the relevant period. FIP is, for present purpose, bound by those acts and omissions.

Conclusion

1. [41]

   I make the following order: